NEW regulations needs to be introduced to hold accountable the actions of law firms, as well as individual lawyers, according to the Queensland Legal Services Commissioner, John Briton.
"The time has come to put the spotlight not only on individual lawyers but law firms," he said.
"The system remains focussed elusively on the conduct of individual lawyers and, with the exception of the handling of trust monies, which has long be subject to audit, that they leave the conduct of law firms entirely beyond regulatory scrutiny," Briton said at a national conference of the Australian Legal Practice Management Association.
Some law firms have chosen to structure themselves as companies and to trade as incorporated legal practices (ILPs), said Briton, but other firms are finding a notable loophole in avoiding regulation and scrutiny, he said.
The Commissioner has now called for regulatory scheme "to put principals of all law firms under the same obligations as legal practitioner directors of ILPs".
New regulation on firms would ensure they keep better management systems, Briton said. It would also empower the Legal Services Commission to "treat all law firms equally, by empowering us to conduct compliance audits of all law firms just as we are empowered now to conduct compliance audits of ILPs".
Briton said he expects his aims to inspire a counter-arguement that the compliance costs of implementing reforms would outweigh the benefits, and that they would impose too great a regulatory burden.
He added that many firms are likely to argue they are already under the same obligations as legal practitioner directors.
"It would take a brave sole practitioner or partner to argue that they are not already under the same obligation ... to keep and implement appropriate management systems, albeit an obligation less well articulated and set out in the rules and not in statute."
Another reason regulation should be implemented, Briton said, is that it's "it's as good as inevitable in any event".
ILPs comprise a sizeable minority of law firms already, he said, and "it is likely on current trends that they will comprise a substantial minority and quite likely even the majority in the medium-term future".
New South Wales has allowed law firms to incorporate since 2001, and the state now has more than 800 incorporated legal practices, or about 20 per cent of all its law firms.
In Queensland, there were 97 incorporated legal practices on 30 June 2008, only a year after law firms were first allowed to incorporate. There were 170 a year later at 30 June 2009 and 197 or just short of 14 per cent of all Queensland law firms at 31 July this year.
Briton also launched an attack on the effectiveness of complaints driven regimes, which he said are a useful regulatory tool but an incomplete and ineffective means of regulating standard of conduct in the delivery of legal services.
"[Complaints driven regimes] confine our gaze to the past. They confine our powers as regulators to dealing with conduct only after the horse has bolted," he said.